Griffin Todd
Financial Management
Case Assignment
Krispy Kreme Case Study
Executive Summary:
Krispy Kreme started as a single donut shop in North Carolina. From its original initial
public offering in 2000 through 2004, the company went from being on top of the Wall
Street’s best all the way down to a highly questionable company in 2004. Krispy Kreme
had a very interesting idea in allowing the customers to see the overall production of the
donuts by differentiating itself with allowing the customers to purchase an experience
along with the actual product. In less than four years, the company went from having 29
stores all the way to 500 stores and it seemed that there was no limit on how far the
company could go. After 2004, the stock decreased 80% and the reason for this was due to
the questionable accounting practices that Krispy Kreme used. The overall state of the
company is in danger with the lawsuits that there are facing and with the media down their
backs causing bas publicity. It is going to be a challenge if Krispy Kreme is going to be
able to survive the situation at hand. Krispy Kreme is a profitable company but it is not as
profitable as their financial statements may show at the end of 2004.
Krispy Kreme:
Krispy Kreme originated as a wholesaler and it made its way to being retailers when the
owner of Krispy Kreme decided to turn the factory into a store and sell the product. He
believed that by giving the customers the ability to watch the production, the customer
would be buying more than just a donut; they are buying the entire experience. Krispy
Kreme generated its revenues with on premises sales, off premises sales, selling mixes and
from franchise royalties. The main on premises sales were the actual doughnuts and these
accounted for approximately 27% of their revenues, off premises sales are 40%, 29% for
the mixes, and finally 4% of revenues come from franchise royalties of Krispy Kreme.
Krispy Kreme differentiated themselves from their competition of Dunkin Donuts by
making most of their sales from the sales of donuts compared to Dunkin Donuts who
focused the majority of their sales coming from coffee.
Financial Analysis:
When I first opened this case up I went directly to the Income Statement and the Balance
Sheet to see what was wrong with the company, and looking through it, it seemed that the
company was doing very well and they were financially strong and were heading in the
